“The rupee has depreciated from Rs. 132 to Rs 170. Within one year the rupee has tumbled by 25%. People have witnessed the fall. The devaluation of the rupee is a good signal for the people to rally for a new economic policy. The depreciation of the rupee shows only one side of the breakdown of the economy of the country and the prevailing situation is such that the exchange rate of the dollar would go up to Rs.200,” says the Leader of the JVP Comrade Anura Dissanayaka.
Comrade Anura Dissanayaka made these observations at a press conference held at the head office of the JVP yesterday (25th).
Speaking at the press conference the Leader of the JVP said, “Today the rupee is depreciating rapidly. Today it has exceeded Rs. 170 for a dollar. Economists warn that a dollar would cost Rs.200 or more at the end of this year. The government has no knowledge to solve this crisis. Recently, the Minister of Finance had said despite the rupee getting depreciated there is no economic crisis in the country. The Minister should have told the country how the depreciation of the rupee is not a crisis. The depreciation of the rupee shows the crisis of one area of the economy. The breakdown of the rupee increases the prices of all consumer goods including that of fuel and gas. The result is an economic crisis that severely torments masses. If the Minister of Finance says otherwise, it shows his knowledge of economics. The government attempts to build an argument that the rupee gets depreciated due to the strengthening of the dollar. It is only a half-truth. The dollar has strengthened to a certain extent in the world market. However, our rupee has fallen not only against the dollar. The value of the rupee against the euro has fallen by more than 7.3% this year. It has fallen by 9.6% compared to Japan’s yen, 2% compared to the Australian dollar, 8% compared to Bangladesh taka, 7% compared to the British pound, 4% compared to Chinese yen and 4% compared to Singapore dollar. As such, the argument that the rupee has depreciated due to the strengthening of the dollar is not correct. The wrong economic policy followed by our rulers too has contributed to the breakdown of the rupee.
Another minister had said whatever others say the depreciation of the rupee was good saying our export income would increase. Such arguments would not find solutions to the economic crisis. If we bought a litre of diesel for one dollar which was Rs.130 in 2015, it would cost Rs. 170 now as we have to pay Rs.170 or more for a dollar now. This is a situation that has arisen due to the depreciation of the rupee and not because the price of fuel has gone up in the world market. The breakdown of the rupee has caused an unfavourable pressure on the economy of the country. It is in such a situation that certain ministers say depreciation of the rupee is favourable to the country. The government doesn’t have any solution for this situation. Former President who ruled the country for ten years and who was also the Minister of Finance responding to a question at a media discussion regarding depreciation of the rupee says he would solve the issue if he comes back to power. He speaks like he has Alladin’s magic lamp. The failure of the economic policies followed by those who have ruled the country for the last 70 years has been the cause for the present economic crisis. The former regime, as well as the present regime, should be held responsible for the present crisis. Today, the whole nation has to pay due to the wrong policies followed.
Today, the world is tied up to the market. This cannot be rejected. Exporting and importing goods is a reality in the world today. The world is also tied up with technology and transportation. It is also tied up with culture. Hence, no one could have an economy that would reject the world market. As such, we need not drift away from the world market. We should mediate in it as a combatant. The main monetary unit of the world market is the dollar. As such, having the rupee related to the dollar is decisive. We need the dollar to import goods. We get dollars when we sell our goods. There are several reasons for the depreciation of the rupee when compared with the dollar. Our country needs US$20 billion to import goods. However, we receive only US$10 billion by selling our goods. Our trade deficit for a year is 100%. This is where our rulers have brought the country. We have to pay US$4 billion annually for the years 2018, 2019 and 2020 to settle our debts. As such, US$ 24 billion is needed to pay for the loan and import goods for this year. However, we get only US$10 by selling our goods, US$ 7 from foreign employees and US$ 1.5 billion from tourism. This means we have US$ 18.5 billion with us but the need is for US$ 24 billion. There is a reduction in the supply of dollars but the demand for it has increased. This is why the dollar has gone up in price. This is simple economics. This is the main reason for the price of the dollar to go up.
In 1977 our country had a trade surplus. Today, it is recorded as a 100% deficit. The reason for this is abandoning of our dollar earning sources. The port is the main centre that earns dollars. Former President Chandrika Kumaratunga sold a jetty to P&O company. President Rajapaksa sold the South Colombo jetty, the most important jetty in Colombo harbour, to a Chinese company. Today, 64% of container handling in Colombo harbour is carried out by the Chinese company. As a result, the amount of dollars the country gets diminished. The foreign company takes away 64% of the dollars the country should get from container handling in Colombo harbour. Another fountain of dollars is the bunkering services. This was carried out by the Ceylon Petroleum Corporation. The bunkering service in Colombo Port was transformed in 2001 into a company called ‘Marine Services’. Ranil Wickremesinghe sold it to John Keels Company. We could have earned a lot of dollars by supplying fuel to ships. The country lost this opportunity. The Supreme Court decided that the selling of this service was wrong and it should be taken back by the Corporation. However, Mahinda Rajapaksa regime, ignoring this decision, sold it to McLarens and later to IOC. Today IOC takes away the dollars they earn from our country. The bunkering service at Trincomalee Harbour too is carried out by IOC. The dollars they earn there too is taken away to India. One of the flourishing enterprises was Sri Lanka Telecom. First, it was sold to Japan. Now it has been handed over to Malaysia. The profits from Telecom is transferred to dollars and taken away to Malaysia. Today, 1/3rd profits from the fuel market are earned by IOC. This company uses Corporation’s stores in Kolonnawa. The pipeline belonging to the Corporation is used by IOC to bring fuel from ship to stores. Fuel is sold in petrol shed that belonged to the Corporation. However, the profit from 1/3rd of the fuel market in our country is transferred to dollars and taken away to India. The rulers in our country closed down avenues that earned dollars and also sold the institutions that could earn dollars for us.
On the other hand, our country has become a state that imports goods that could be produced in the country. We import 91.5% of sugar, 80% of chillies, 82% of onions, 100% of paper required for the country and all sorts of clothes the country needs. The industrial sector in the country has been broken down. The textile, sugar, paper factories the country had have been closed down. Ours has been made a country that largely depends on imports. Even the Wesak lantern and the kite is imported from China. As such, we have to spend a large number of dollars for imports.
In 1977 we owned 5% of the world trade. If the world trade was US$ 200 we received one dollar. Today Sri Lanka’s share in the world market is 0.045%. this means for us to get one dollar there should be a trading of US$ 2000. In the 40 years since 1977, our share in the world market has dwindled by 10 times. Our rulers did not have a vision. By the 70th decade, we had the tea – rubber- coconut economy. We should have changed according to the demand of the world market. The rulers should have had such a vision. Our whole export market shrank. Our rupee is dwindling as a result of the wrong economic policy the rulers have followed. The rulers who have ruled our country should be responsible for this situation.
We have to adopt long term and short term strategies to prevent the rupee from depreciating. As a short-term measure, the government should mediate to stabilize the rupee. It should be done as the depreciation of the rupee would indirectly aggravate the crisis. Foreign employees are having second thoughts about sending the money they earn to this country. They are waiting for the dollar to go further up to get more benefits. The exporters too delay the dollars they get for their exports expecting the dollar to go up further. When the rupee is unstable those who have dollars with them do not use them. As such, even the amount of dollars that are due to the country get blocked. As a result, the dollar goes up in another round. This bizarre cycle ends up in a crisis. Hence, the dollar should be brought to a certain stability within a short time. The breakdown cannot be arrested without this stability. It also needs a long-term plan. It is necessary to find ways of settling the trade deficit. We have to think how we could earn a share of the world market. However, these rulers do not have such long-term plans.
97% of biscuits consumed in our country are made in this country. However, the government is preparing to hand over the biscuit market to foreigners. Already, foreign biscuits have been stocked in supermarkets. There is a law that the ownership of companies that render services to ships should not be owned by foreigners. However, the Minister of Finance had proposed in the last budget to remove this 40% law. This means the country would lose the dollars earned from rendering services to ships. The government, instead of long-term plans, is thinking of earning some money ‘for the time being’. The rulers are in an illusion that such acts would strengthen the economy. Thinking that the economy would go forward without production but only with circulation is a myth. As such, a long-term plan is necessary to develop production and limit imports and to earn a due share in the world market.
However, it is evident that these rulers do not have such a plan. The media discussion of the former President and the statements by the Minister of Finance and the Prime Minister indicate that they have not comprehended the present economic crisis and they don’t have solutions for such crises. The only solution they know is to take more and more loans. They are getting a loan from the USA and certain state banks have been advised to get loans in dollars. Getting dollars for loans would be an answer for the moment but it would create a massive crisis in the long run. The people in the country have to pay the price for the failure of the rulers to have a correct economic policy.
A new economic policy is essential against the present incorrect economic policy followed by the present rulers. The depreciation of the rupee and the economic crisis shows the people the failure of the economic policy followed by the rulers. The rupee has depreciated from Rs. 132 to Rs 170. Within one year the rupee has tumbled by 25%. People have witnessed the fall. The devaluation of the rupee is a good signal for the people to rally for a new economic policy.”
The Member of the Central Committee of the JVP and the Member of the Uva Provincial Council Comrade Samantha Vidyaratna was also present.